There have been two notions of equilibrium to this point in the course.The first involves a societal PPF, budget/revenue line, and societal IC that shows the exact same amount of good 1 being produced as is consumed (and the same for good 2).The second involves the intersection of supply and demand curves for a single good.Show each of these graphically.

Show the derivation of a demand curve from the underlying fundamentals of consumers solving their problem.In other words, show a budget constraint and indifference curve that shows a consumer solving his problem.Then change the price of good 1 (either decrease or increase it) and show the new amount of good 1 consumed (assume the indifference curves are basically parallel and behave "nicely").Change the price one more time (in the same direction) and show the new amount of good 1 consumed.Plot your three (Q₁, P₁) points on a separate graph to reveal your demand curve.

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